Hawaii Administrative Rules
Title 18 - DEPARTMENT OF TAXATION
Chapter 237D - TRANSIENT ACCOMMODATIONS TAX
Section 18-237D-1-03 - "Gross rental" or "gross rental proceeds", defined
Current through February, 2024
(a) In general. As used in this chapter, "gross rental" or "gross rental proceeds" means the gross receipts, cash or accrued, of the taxpayer received as compensation for the furnishing of transient accommodations and the value proceeding or accruing from the furnishing of transient accommodations without any deductions for the cost of property or services sold or of materials used, labor cost, taxes, royalties, interest, discounts, or any other expenses whatsoever.
(b) Included in gross rental or gross rental proceeds. Gross rental or gross rental proceeds include the following:
Example 1. Hawaii, Inc. owns a condominium apartment in Waikiki which is used for the activity of furnishing transient accommodations. Hawaii, Inc. charges $150 a day for the rental of the condominium apartment. Mr. Tourist stays at the condominium apartment for three nights beginning on June 1, 1990. Mr. Tourist does not incur any charges for food, beverage, laundry, telephone, or any other guest amenities. Hawaii, Inc. adds five percent of the total room charge of $450, or $22.50, as a separate item on Mr. Tourist's bill. Mr. Tourist pays Hawaii, Inc. $472.50 upon checking out. The $450 represents gross rental to Hawaii, Inc.
Because this transaction occurred before July 1, 1990, gross rental also includes the $22.50 visibly passed on to Mr. Tourist as a separate charge on his bill. The transient accommodations tax to be paid to the Hawaii State Tax Collector is five percent of $472.50, or $23.63. Hawaii, Inc. shall report as the gross rental subject to the transient accommodations tax $472.50.
Example 2. Hawaii, Inc. offers travel agents that book guests into its condominium apartment a 10 percent commission based upon the condominium apartment's daily rate of $200. Hawaii, Inc. collects $200 and remits the $20 commission to the travel agent. Because commissions are a nondeductible cost, the gross rental is $200.
Example 3. Hawaii, Inc. offers travel agents that book guests into its condominium apartment a 10 percent commission based upon the condominium apartment's daily rate of $200. The travel agent collects $200 from the guest, withholds the $20 commission, and remits the remaining $180 to Hawaii, Inc. Hawaii, Inc. is required to include in its gross rental the $20 commission withheld by the travel agent. The gross rental is $200.
Example 4. Hawaii, Inc. expects a slow sales period and begins to offer condominium apartments at a special rate of $180 a day during this slow period. The condominium apartments normally rent for $200. As an added incentive to the travel agent, Hawaii, Inc. offers a special 15 percent commission rate to travel agents based upon the special rate of $180. Hawaii, Inc. is required to include the travel agents' commissions in its gross rental as a nondeductible cost and is required to pay the transient accommodations tax upon the $180 special rate.
(c) Excluded from gross rental or gross rental proceeds. Excluded from gross rental or gross rental proceeds are the following:
Example 1. Ms. Landlord rents a condominium she owns to Mr. and Mrs. Tourist for $500 for the month of July, 1999. There is a flat charge of $500, and there are no separately stated charges for the general excise tax or the transient accommodations tax, on Ms. Landlord's billing to the Tourists. Ms. Landlord's general excise tax liability is four percent of $500, or $20, and her transient accommodations tax liability is 7.25 percent of $500, or $36.25.
Example 2. Paradise Hotel charges $50 a day for rental of a hotel room as a transient accommodation. Mr. Tourist stays at the hotel for three nights beginning January 1, 1999. Hawaii, Inc. adds 7.25 percent of the total room charge of $150, or $10.87, for transient accommodations tax, and four percent of the $150, or $6, for general excise tax, as separate items on Mr. Tourist's bill. Mr. Tourist pays Hawaii, Inc. $166.87 when he checks out. Because Paradise visibly passed on both taxes by separately stating them and charging $166.87, both taxes are excluded from gross rental. The transient accommodations tax to be paid after January 1, 1999, is 7.25 percent of $150, or $10.87.
Example 3. Paradise Hotel also rents a similar room to Ms. Mainland, a friend of Mr. Tourist, in January 1999. In addition to her room charges of $150, Ms. Mainland incurs charges of $100 for food, $75 for beverages, $10 for telephone calls, and $15 for laundry. All charges total $350. Paradise computes its transient accommodations tax by applying the 7.25 percent rate only upon the room charges of $150. Paradise's transient accommodations tax, therefore, is $10.87.
If Paradise visibly passes on and collects the $10.87 from Ms. Mainland and charges $160.87 for the room, the transient accommodations tax to be paid to the Hawaii State Tax Collector is 7.25 percent of $150, or $10.87.
Assume that all of the charges constitute gross income for purposes of chapter 237, HRS, the general excise tax law. The amount of transient accommodations tax visibly passed on and collected is not included in gross income under section 237-24.3(8), HRS, but the amount of general excise tax visibly passed on is included in gross income. Thus, if Paradise, in addition to the $10.87 transient accommodations tax, adds four percent of the total charges of $350, or $14, to Ms. Mainland's bill and charges a total of $374.87, Paradise's gross income subject to the general excise tax is $374.87 minus $10.88, or $364. The tax to be paid by Paradise to the Hawaii State Tax Collector is four percent of $364, or $14.56 of general excise tax, plus $10.87 of transient accommodations tax, for a total of $25.43.
Example 4. Paradise Hotel rents a room to Ms. Mainland on January 1, 1999, under the American Plan and charges Ms. Mainland $200. To compute the transient accommodations tax, Paradise shall deduct the cost of meals from the total price charged Ms. Mainland. If the cost reasonably attributed to meals is $50, then the cost of the room is $150.
Paradise visibly passes the general excise tax and the transient accommodations tax on to Ms. Mainland, so that the total charge to Ms. Mainland is $218.87 comprised of the $200 charge, $8 for general excise tax on the $200, and $10.87 for transient accommodations tax on the $150. Paradise is to pay the Hawaii State Tax Collector four percent of $208 or $8.32 of general excise tax, and 7.25 percent of $150 or $10.87 of transient accommodations tax. The total tax payable is $19.19.
Example 5. Paradise Hotel accepts an advance deposit of $100 from Ms. Mainland to confirm her room reservation. Ms. Mainland does not show up and forfeits the $100 deposit. The $100 is treated as a forfeited deposit and is not subject to the transient accommodations tax because it is excluded from gross rental. The $100, however, is subject to the general excise tax.
(d) Special daily rate. Gross rental or gross rental proceeds is the amount charged and collected, which may be determined under a kama'aina, governmental, military, corporate, hotel employee, senior citizen, or a seasonal rate, or under a written contract on a noncommissionable negotiated rate.
Example 1. Paradise Hotel enters into a negotiated, written contractual agreement with Aloha Tours, a tour packager, in which the hotel agrees to provide the tour packager with rooms at a contracted rate of $90 a room per day. The rooms contracted for normally sell for $100. The contract specifically states that no commission is to be paid by Paradise to Aloha Tours and in fact no commission is paid by Paradise or collected by Aloha Tours from the tourists. The arrangement is treated as a contract rate. Paradise is to pay the transient accommodations tax and the general excise tax on the $90 special rate established in the written contract with Aloha Tours.
Example 2. Paradise Hotel enters into a negotiated, written contractual agreement with XYZ Association for a special daily room rate of $90 for the Association's members who attend its annual convention. These rooms normally sell for $100. The contract specifically states that no commission is to be paid by Paradise to XYZ Association, and in fact no commission is paid by Paradise. The arrangement is to be treated as a special rate, and Paradise is to pay the transient accommodations tax and the general excise tax on the $90 special rate.
Example 3. XYZ Hotel offers kama'aina rates for local residents. In the typical situation, a local resident registers with the hotel with proof of Hawaii residency and is allowed a kama'aina rate of 10 percent off the stated daily room rate. If a room usually rents for $100 per day, the local resident is charged $90. XYZ's gross rental is $90, and XYZ must pay the transient accommodations tax on this amount because the kama'aina rate represents the gross rental charged and collected which is subject to the transient accommodations tax. XYZ is also subject to four percent general excise tax on the gross income of $90.
Example 4. XYZ Hotel offers travel agents that book guests into its hotel a $10 commission. In this example, the local resident in Example 3 books hotel accommodations with XYZ Hotel through Aloha Travel Agency rather than directly with the hotel. The local resident would be allowed a 10 percent discounted kama'aina rate and charged $90 for a room which would customarily be let for $100. Aloha Travel collects the $90 from the local resident, deducts a $10 commission, and remits the remaining $80 to XYZ Hotel. XYZ Hotel is required to record on its books the full $90 kama'aina rate, and pay the transient accommodations and general excise taxes upon this amount. The commission paid to Aloha Travel is not an amount excludable from gross rental. See also subsection (b)(2) above.
(e) Deductions from gross rental or gross rental proceeds.
(f) Determination of gross rental or gross rental proceeds where transient accommodations are provided as part of tour packages.
Example. Renter Corporation leases an entire building situated on Maui from the owners of the Kaanapali Beach Condominium and operates the condominium apartments as transient accommodations. Renter Corporation offers Aloha Travel, a tour agency which books guests into the condominium apartment, a 15 percent commission based upon the daily rate of $175. Aloha Travel collects the $175, deducts the $26.25 commission, and remits the remaining $148.75 to Renter Corporation. Although Renter Corporation actually receives only $148.75, Renter Corporation is required to record as gross rental upon its books the full $175, which includes the commission withheld by Aloha Travel, and to pay transient accommodations taxes upon that amount.
Example 1. Hawaii Travel Agency puts together a fly-drive package for travel to Molokai which consists of air fare, hotel accommodations, and car. The hotel accommodations are provided through a negotiated, written agreement between Hawaii Travel and the Molokai Surf Hotel. Based on this agreement, the Molokai Surf provides hotel rooms which usually are rented at a rate of $60 at a contracted, reduced rate of $50. The agreement specifically states that no commission is to be paid by Molokai Surf to Hawaii Travel, and in fact no commission is paid by Molokai Surf. The total fly-drive package sells for $100. For each package, Hawaii Travel remits $50 of the $100 total collected for the package to the Molokai Surf. The Molokai Surf receives and books the $50 payment for each room. The gross rental allocated to Molokai Surf in this situation for each room provided under this travel package is $50, and Molokai Surf is required to pay transient accommodations tax upon that amount.
Example 2. Mainland Travel has a tour package which provides air fare, a condominium apartment for seven nights, ground transportation, and luau for $1,500. Mainland Travel negotiates a written agreement with Waikiki Beach Apartments to provide the seven nights accommodations in a condominium apartment at a rate of $700 instead of the regular rate of $840. The agreement specifically states no commission is to be paid to Mainland Travel by Waikiki Beach, and in fact no commission is paid by Waikiki Beach. Waikiki Beach must record the $700 it receives for each package as gross rental, and pay the transient accommodations tax upon the $700.
FMV of TA / FMV of components x Package Price = Gross Rental
Example 1. ABC Hotel puts together a neighbor island package consisting of air fare, hotel room, and car for a day. The components of the package are provided by independent vendors who sell the components individually. Purchased individually, the round trip air fare to the selected island costs $75, the hotel room at the ABC Hotel costs $50, and the car rental costs $20. The total components purchased individually would cost $145. ABC Hotel sells the package to customers for $130. The amount allocated to the transient accommodations and subject to the transient accommodations tax is determined as follows:
Example 2. ABC Hotel puts together a package consisting of hotel accommodations, helicopter ride, and luau. The hotel accommodations if sold individually cost $50. The helicopter ride and the luau are provided by independent vendors who do not sell their components individually. The department finds that a comparable helicopter ride from other helicopter companies costs $100, and a comparable luau from other luau companies costs $15. Thus, the fair market value of the components is $50 + $100 + $15 = $165. The package is being sold to customers for $150. The amount allocated to the transient accommodations and subject to the transient accommodations tax is determined as follows:
Example 3. ABC Hotel also has an American plan package which consists of hotel accommodations and a meal allowance at a restaurant owned by the hotel. If purchased individually, the hotel accommodations cost $250 and the meals cost $140. The department determines that these prices are fair market prices. Thus, the fair market value of the components purchased individually is $390. ABC Hotel sells the total package to customers for $320. The amount allocated to the hotel accommodations and subject to the transient accommodations tax is determined as follows:
